The federal government has recently announced a significant suite of business stimulus measures, comprising several initiatives and programs aimed at keeping businesses operating during COVID-19.

But with a glut of sometimes confusing information available out there, you might be left wondering how exactly these measures affect your business, your ability to retain staff or invest in equipment.

As part one of a two-part blog series, we spoke with senior accountant and financial advisor, Haydn Stewart, the Executive Director of Melbourne-based advisory firm, Trident Financial Group, who gave us a rundown on the JobKeeper and boosting cash flow for employers incentives.

Haydn Stewart, Trident Financial Group

Hi Haydn, could you give an overview of the JobKeeper payment?

To the government’s credit, JobKeeper is the largest stimulus offered so far and it’s a very big spend from a taxpayer’s point of view. The intention of JobKeeper is to keep employees engaged with their employers, in the form of a subsidy for employers to continue paying their staff.

Under JobKeeper, businesses can receive $1,500 per fortnight per eligible employee. In doing so, they are able to continue to keep staff on and stimulate the economy at the same time. If there is more cash circulating through the economy, we’re more likely to make it through the downturn we’re seeing.

Could you take us through the timeframe for the JobKeeper measure? 

In terms of the total timeline, we’re looking at six months from inception, so from the fortnight starting 30th March 2020 to the fortnight ending 27th September 2020, where you’re able to claim the $1,500 per eligible employee per fortnight. If you’re an eligible employer, you’re able to apply for it right now and get started—you just need to make sure you’ve enrolled and have paid employees by the 8th of May, 2020, to ensure you’re eligible for the March and April fortnight pay periods.

There are a few employer eligibility requirements for JobKeeper, can you run us through how the reduction in turnover is calculated?

This can be a bit tricky to calculate, but it is essentially calculated on your GST turnover. There’s been a lot of debate whether this figure is based on what you invoice—which we call an accrual basis of measuring turnover, or of it’s based on a cash basis—or when you actually receive the money into the business. The ATO (Australian Tax Office) have announced they’re happy for businesses to measure on either of those two indicators, whether it’s cash you receive, or invoices you’ve generated. However, they may ask you why you chose one measure over another.

In terms of how and when we calculate the turnover, there are a number of time periods we can look at.

You can choose whether to assess decline in turnover on a monthly timeframe between March 2020 and September 2020 or on a quarterly timeframe for the June or September quarter. You can apply based on either of these.

It’s important to note that you can measure your decline in turnover based on a ‘projected GST turnover’ versus your ‘current turnover.’ For example, if you’re looking down the barrel of large drop in the June 2020 quarter, you can project what your June quarter sales would be. If that projection is a 30 per cent decline or more than your ‘current turnover’—your turnover for the June quarter of 2019—then you’ll be eligible for JobKeeper (for businesses with an aggregated turnover of $1 billion or less).

Are eligibility requirements routinely tested, or is it the case that once you’re eligible for JobKeeper that you won’t be tested again?

Once you’ve been declared eligible then you’re in, but there is a monthly requirement to report both your previous month turnover and also your projected turnover to the ATO.

You might have a bad month in the first month and then for whatever reason businesses picks up the following month; it has no impact on whether you’re eligible for JobKeeper. So we may see circumstances where people are eligible for JobKeeper, but their businesses are actually trading well.

Just bear in mind that with JobKeeper, you need to show a genuine 30 per cent decline or in the case where you experience a slightly smaller fall, you need to be able to prove you calculated it in ‘good faith’.

Are there any alternative ways to be tested, say if you’re a new business or you’ve been affected by drought, or bush fires?

Good question. There are several alternative tests for businesses, one being for drought as you suggested or you might have been a startup in the 2020 financial year so you have very little sales information. In these cases you can compare alternative numbers from a year before (2018), or for the case of a new business, compare an average monthly GST turnover since you started.

There are also alternative measures for businesses who might have restructured, bought a business, or sold a business, or if your business income fluctuates for some other reason. In any case, I’d suggest reviewing the alternative test guidelines to see if there’s an option for your business to pursue the JobKeeper payment.

Some sage advice there, Hayden. Can you now talk us through the boosting cash flow incentive?

Sure, the boosting cash flow for employers measure was introduced during the first round of stimulus packages when COVID was first coming to light. Essentially, it’s a tax credit that is paid specifically to employers, and will generally be equivalent to the amount that is normally withheld from wages paid to employees. This credit will now flow to businesses instead of being held by the tax office.

It’s a minimum of $20,000 and a maximum of $100,000, the $20,000 minimum is paid regardless of how much the business withholds from its employees’ salaries. Like JobKeeper, the intention is to get cash back to businesses to keep them employing people and for the economy to continue ticking over.

Are you required to pay tax on the boost itself? And if your cashflow does improve down the track, would you need to pay the boost back in any way?

The simple answer is ‘no’ to both. If you employ people, regardless of whether your business is doing well or not, and provided you meet the eligibility requirements, you will be entitled to the cash flow boost, and it doesn’t need to be repaid.

Again, there are integrity provisions in place, so if you’re found to be manipulating the system you could be potentially asked to pay it all back. There are also further tax implications if you’re receiving the money say into a trust. But under that scenario you would need to engage your tax accountant to review how it would work under your business structure.

Do you have any other cash flow advice for business owners, particularly those in trades employing trainees or apprentices?

Employers with trainees or apprentices can look at registering for the 50 per cent wage subsidy, which may also be useful in cases where the person is not technically an employee or where they’re not getting a JobKeeper payment already.

But there’s a whole raft of measures and concessions introduced by the ATO that would be worthwhile to look at, and the ATO are quite helpful in terms of putting in place favourable payment plans so that you can manage your cash flow during this time. The ATO website has a lot of good resources. I think that understanding your entitlements under these stimulus packages is key to making informed decisions, and once you understand what you’re entitled to, you can project and create a cash flow plan from there.

If you’re feeling nervous and want some professional advice, I would recommend reaching out to your accountant to walk you through the entitlements and how to manage your situation, especially in regard to the JobKeeper payment. Seek some professional advice and then, from there, you can see how to make the best decisions with your business moving forward.

Thanks, Haydn!

Wondering how COVID-19 stimulus package measures help your business in a real-world situation, when acquiring new trucks? Check out our stimulus measures information sheet here.

Also, stay tuned to our Content Hub for Part 2 on this series!